Theresa Stadheim-Schwegman Lundberg & Woessner, PA Sharon Israel – Mayer Brown LLP June 2015 Lexmark v. Impression Products - patent exhaustion issues 1 © AIPLA 2015

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Patent exhaustion background  Patent exhaustion restricts patent owners from asserting patent rights against a patented article after the initial sale of the article by or on behalf of the patentee  U.S. common law doctrine Lexmark v. Impression Products – Patent Exhaustion Issues © AIPLA

Facts of case U.S. District Court for the Southern District of Ohio. Lexmark manufactures printers and toner cartridges Lexmark sued Impression Products for patent infringement for acquiring, refilling, and selling used cartridges. Cartridges were sold outside the United States and were also sold under Lexmark’s “Return Program.” Lexmark v. Impression Products – Patent Exhaustion Issues 4 © AIPLA 2015

District court stipulated judgments first judgment based on order denying a motion to dismiss Lexmark’s complaint for alleging patent infringement of products initially sold overseas second judgment based on order granting a motion to dismiss Lexmark’s complaint for alleging infringement of certain products sold subject to a single-use contractual restriction. On appeal to Federal Circuit Lexmark v. Impression Products – Patent Exhaustion Issues 5 © AIPLA 2015

First judgment (regarding extraterritorial sales) District court cited 2001 Federal Circuit decision, Jazz Photo Corp. v. United States International Trade Commission. In Jazz Photo Federal Circuit held that an authorized first sale must have occurred within the United States for exhaustion to apply. Lexmark v. Impression Products – Patent Exhaustion Issues 6 © AIPLA 2015

First judgment (cont’d) Impression argued that Jazz Photo was overruled by Kirtsaeng v. John Wiley & Sons, Inc., (Supreme Court, 2012) which determined that the Copyright Act’s parallel “first sale” doctrine did not have such a geographical limitation.Kirtsaeng v. John Wiley & Sons, Inc. *** note Kirtsaeng was copyright case Lexmark v. Impression Products – Patent Exhaustion Issues 7 © AIPLA 2015

Second judgment (contractual restriction) District court granted Impression’s motion to dismiss relating to the cartridges sold under the Return Program. Quanta Computer, Inc. v. LG Electronics, Inc., held that authorized sales of patented products can still exhaust patent rights, even if those sales are subject to restrictions. Lexmark v. Impression Products – Patent Exhaustion Issues 8 © AIPLA 2015

Second judgement (cont’d) Lexmark argued that Quanta Computer did not create a blanket rule against all post-sale restrictions Lexmark cited 1992 Federal Circuit decision, Mallinckrodt, Inc. v. Medipart, Inc.  A sale of medical equipment under a single-use restriction did not exhaust the seller’s patent rights in that product. Lexmark v. Impression Products – Patent Exhaustion Issues 9 © AIPLA 2015

Second judgement (cont’d)  According to district court, Lexmark had not established that the distributors of the Return Program cartridges were restricted or conditioned, and therefore the sale of the cartridges exhausted Lexmark’s patent rights. Lexmark v. Impression Products – Patent Exhaustion Issues 10 © AIPLA 2015

April 14, 2015 – Lexmark International v. Impression Products, Inc. - Federal Circuit ordered an en banc hearing on two issues Lexmark v. Impression Products – Patent Exhaustion Issues 11 © AIPLA 2015

12 Lexmark v. Impression Products – Patent Exhaustion Issues © AIPLA 2015 FIRST ISSUE Does sale outside of U.S. give rise to patent exhaustion in U.S.?

13 Lexmark v. Impression Products – Patent Exhaustion Issues © AIPLA 2015 SECOND ISSUE Do sales of a patented article under a restrictive contract exhaust the patent owner’s rights to control the sale and use of the patented article?

Thanks for your attention! Questions? Sharon Israel Partner, Mayer Brown LLP 700 Louisiana Street, Suite 3400, Houston, TX Theresa Stadheim Attorney, Schwegman Lundberg & Woessner 121 South 8 th Street, Minneapolis, MN